Equilibrium Levels of Real National Output Flashcards
1
Q
When does an equilibrium in real national output occur?
A
When AD equals AS.
2
Q
What are the key characteristics in this equilibrium?
A
- Price stability
- Full employment
- Sustainable output: No desire to change.
3
Q
How does an increase in AD cause changes to the equilibrium?
A
Inflation and increase in national output.
4
Q
How does a decrease in AD cause changes to the equilibrium?
A
Deflation and decrease in national output.
5
Q
How does an increase in AS cause changes to the equilibrium?
A
Right shift, lower price level and increase in national output.
6
Q
How does a decrease in AS cause changes to the equilibrium?
A
Left shift, higher price level and decrease in national output.
